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Australians are all too familiar with disasters arising from natural hazards like bushfires, cyclones, and floods. With climate change, we face the possibility of more frequent and intense natural hazards in new and unexpected places.
As we enter an uncertain decade, we find ourselves increasingly asking: What does a disaster-resilient Australia look like? How can we help our most vulnerable Australian communities endure the cumulative effects of frequent disasters? Amid tightening fiscal budgets, how can we create the right environment for our communities and economy to prosper in this new reality?
Answering these questions requires some deep thinking about the collective actions needed to support our communities, businesses, and the broader economy to become more disaster resilient; to not only adapt to a “new normal” but thrive in a changing climate. From a policy perspective, this becomes more pertinent when we consider that the average annual total economic costs of natural disasters of Australia are forecast to reach $39 billion per year by 2050 (Deloitte Access Economics, 2017), and the fiscal constraints that will increasingly be imposed on government disaster expenditure by Australia’s aging population.
To that end, the Disasters and Economic Resilience: The Effects of the Queensland Floods 2010-11 on Individual Income – A Case Study on the Brisbane River Catchment Area report explores the impact of the Queensland Floods 2010-11 on the income trajectory of employed residents of the four Brisbane River Catchment Area (BRCA) local government areas (LGAs) depicted in Figure 1.
The Queensland Floods 2010-11 remain one of Australia’s costliest flooding events, causing an estimated $6.7 billion in tangible damages, with an overall cost of $14.1 billion (Deloitte Access Economics, 2016). To the best of our knowledge, this study is the first in the economics literature to examine the impact of a riverine-flooding in an Australian metropolitan economy on individual income, considering demographic and sectoral heterogeneities and post-disaster government assistance.
By focusing on individuals’ economic resilience (measured through changes in their income stream), the report explores how disaster-induced economic shocks can be transmitted to individuals vis-à-vis income-earning channels, and offers a greater understanding of how indirect costs of disasters are borne by different segments of the workforce. Such costs are currently less known compared to direct damages reported in the immediate aftermath of disasters.
By examining the economic dimension of disaster resilience at the individual level, our research helps policymakers better understand the socioeconomics of natural disasters and formulate public policies in a sustainable way that better distributes scarce budgets and resources towards vulnerable socioeconomic groups and industries of employment that are more sensitive to disasters.
Recognising the profound and long-lasting psychosocial impacts of the floods, the report outlines the socioeconomic and disaster resilience profiles of the BRCA LGAs, and provides additional information to contextualise our assessment so that policymakers can holistically interpret our findings, within the broader social and economic conditions arising from the floods.
Isolating the effects of the floods from other shocks that hit the BRCA LGAs is challenging. The report attempts to pinpoint observed income effects to the Queensland Floods 2010-11 by using a difference-in-differences modelling approach. This approach compares income changes of individuals living in the BRCA LGAs (treatment group) with those living in comparable zones in Australia (control group). Because of their comparability, it is the control group which provides us with the income path that would have occurred for BRCA LGA employed residents had the floods not happened, and thus enable us to compute any income deviations (losses or gains) arisfrom the floods.
The report utilises the Australian Census Longitudinal Dataset (ACLD), which provides a unique opportunity to robustly examine the flood’s impacts across a longer timeframe (across 2006, 2011 and 2016) and across multiple dimensions (demographic and economic). All results we report are net results, post any disaster relief and recovery efforts; are relative to our baseline year (2006); and are compared to our control group. We define short-term results as changes over 2006-11, and medium-term results as changes over 2006-16.
While we develop the right modelling framework to capture income effects arising from the floods, data limitations have hampered our ability to statistically confirm that our control group is comparable to the BRCA LGA sample. The key implication is that our findings are not causal but correlational.
Nevertheless, our report’s findings offer new and compelling insights on how disasters like the Queensland Floods 2010-11 interact with existing economic conditions and workforce compositions to affect individuals within the community, and in turn their ability to economically cope with the ongoing effects of the disaster.
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